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issue: August 2004 APPLIANCE Magazine

China Report
Wholly-Owned Electrolux China Now Operating in Changsha

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by Sean Zhang, China correspondent, APPLIANCE magazine

Electrolux China Co. Ltd., a 100-percent wholly owned division of the Sweden-based home appliance producer AB Electrolux, recently came into operation in Changsha, China.

“We have finished the strategic marketing integration in the whole China region,” Don Gadsden, president of Electrolux China, said at the establishment ceremony.

In 1996, Electrolux established a joint venture with Zhongyi Group, a domestic refrigerator maker based in Changsha. The company, named Electrolux Zhongyi (Changsha) Refrigerator Co. Ltd., was 60-percent owned by Electrolux , with Zhongyi owning the remaining 40 percent. In September 2003, Electrolux acquired the remaining 40 percent of Zhongyi from its joint-venture partner. After gaining an exclusive ownership, Electrolux has made follow-up investments in a new washing machine production line with an annual production capacity of 500,000 as well as expanding the production capacity of refrigerators. Peter Birch, CEO of Electrolux Asia-Pacific stated: “The Changsha plant will be built as a world-class-equipped manufacturing base as well as our largest production facility in China.”

The Changsha-registered Electrolux China Co. Ltd. will not only be a manufacturing base for Electrolux, but will also serve as an R&D facility for the appliance company. After implementing strategic regulation in the marketing channel and organizational structure last year, Electrolux will put its major focus on product innovation in 2004, which has been called the “year of products” for Electrolux.

Backed up by the ever-expanding investment in China, Electrolux has been well prepared to compete for a higher market share in a wide range of product lineups. The R&D budget of Electrolux China this year is said to be more than 125 million yuan (approx. U.S. $15 million). “Around 50 to 60 percent of our products for sale this year will be newly launched types, which covers our core business sectors such as refrigerators, washing machines, kitchen appliances, and air-conditioners, with more than 50 new models included,” Vincent Tai, Director of Marketing & Business development, told APPLIANCE.

The strategy of establishing a wholly owned enterprise has been very popular among multinational companies in recent years. Limited by Chinese investment policies put in place in the early 1990s, foreign companies have had to choose the form of joint ventures or cooperative enterprises to start their business in China. However, compared to wholly owned companies, joint ventures aren’t always as cost effective. “The establishment of a wholly owned Zhongyi Refrigerator is a symbol of a new development stage, which has far-reaching significance for Electrolux China,” said Mr. Gadsden.

During a sales conference Electrolux China held a few months ago, Mr. Gadsden announced a sales and marketing budget valued at 250 million yuan (approx. $30 million), a 35-percent leap from 2003.

According to Mr. Gadsden, Elextrolux has already established a design center and a global sourcing center in Shanghai, as well as an electronic components R&D center in Shenzhen. “Over the next 3 years, the value of our raw material and semi-production procurement in China will be reaching as high as $1.2 billion annually,” Mr. Gadsden said.

Until now, Electrolux’s total investment in China has been more than $170 million, which makes it one of the largest foreign-invested enterprises in the home appliance industry. According to the company’s development schedule, by 2006 it is striving to produce 1.3 million refrigerators and 0.5 million washing machines.


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